Poverty in Guinea continues as wrangling stalls mining boom

The nation has the world’s largest untouched iron ore deposit, but decades of authoritarianism and a stagnant economy are stopping it from reaping any rewards

By Bate Felix and Clara Ferreira-Marques / Reuters, CONAKRY and LONDON

Then, with a global economic crisis hurting the price of iron ore and political tumult at home keeping many investors away, Conte’s government awarded the northern half of the former Rio concession to BSGR. It was a good deal for Steinmetz.

BSGR was not required to pay any cash up front and was given permission to export via Liberia, a much shorter and less expensive route than exporting across Guinea. Critics say that this would limit the economic benefits for Guinea.

In return, Steinmetz agreed to build a US$1 billion passenger and freight railway from the capital, Conakry, on the west coast to Kerouane in the southeast. He later sold 51 percent of the project to Vale in a deal valued at US$2.5 billion, of which US$500 million has been paid so far.

BSG and Vale say their concession represents a fair deal for Guineans, and the export route through Liberia makes better economic sense than shipping ore across Guinea.

However, the terms have been widely criticized by advocates of government transparency, who say the authorities should have secured a better deal.

British telecommunications billionaire Mo Ibrahim, who set up a philanthropic foundation to promote good governance in Africa, asked at a forum in Senegal last month whether “the Guineans who did that deal” were “idiots, or criminals, or both?”

Conte died at the end of 2008 after ruling Guinea for nearly one-quarter of a century. A junta led by an army captain seized power and ruled violently until Conde was elected in 2010.

Since then, Conde’s new government has summoned international advisers like former British prime minister Tony Blair and billionaire Soros Fund Management founder George Soros to help it determine how it can win better deals from the mining firms.

Blair’s Africa Governance Initiative and the Soros-backed Revenue Watch say they are helping Conde and his government implement a new mining code that will increase economic benefits to ordinary Guineans from mining deals.

Steinmetz’s firm complains about meddling by the advisers.

“The intentions may be good, but it isn’t helping Guinea and gives legitimacy to a discredited regime that has become embroiled in a large number of scandals including charges of corruption,” said Dag Cramer, chief executive of the conglomerate that owns BSGR.

Last year, Rio — ousted from the north of Simandou in 2008 — secured permission to mine the southern half of the deposit, agreeing to pay US$700 million and give the government the right to up to 35 percent of the project, which is worth between US$10 billion and US$20 billion.

Unlike Steinmetz and Vale, Rio pledged to build an export route across Guinea for its ore. The route, to be built in conjunction with the government, will mean constructing almost 700km of rail, 35 bridges and a four-berth wharf 11km offshore.

Rio says commercial production will start in 2015, though it is still awaiting government decisions on logistics.

That leaves the Steinmetz half of the concession stalled. Work on the Conakry-Kerouane railway that Steinmetz pledged to build stopped last year, after a disagreement over contractors.

If the government was to revoke the Steinmetz permit, mining executives say it would frighten off investors and delay production even further. Demand for iron ore has been soft and mining companies are cutting spending.